Looking for advice on ROE and best strategy

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Looking for advice on ROE and best strategy

Brenda Reems
Bismarck, ND · Member since 2025 · 38 posts · 10 votes

I have been exploring the idea of doing a live in flip or "modified" house hack. As a back ground, I have a senior and sophomore. So, I don't want to do anything too drastic like living in a 2/1 apartment. But, I am looking at potential ways to decrease my monthly expenses or utilize my money for a live in flip. I put "modified" house hack because I thought maybe we could live in the full duplex, then as they move out, I could rent the units out. I am trying to accelerate FIRE.

My main question is what to do with my current home? I bought the home about 7 years ago and did a major rehab on it and I have quite a bit of equity into it. These are the numbers:

Purchase price: $350,000

Rehab cost: $120,000

Current value: $575,000-625,000

Loan amount: $250,000

Interest rate: 2.75%

PITI: $1,900, currently $625 goes toward principal

Potential rent: $3,000-3,200

Option 1: rent out current house and find something in my buy box. I initially thought this was the way to go but this may not be the best ROE. I would also need to decrease the amount I put towards my 401K. I'm self employed and have been utilizing the mega backdoor roth strategy. I would use savings for the down payment and pay for rehab costs a long the way. I would take out a HELOC on current home to have in case of emergency but I would not dip into this if I didn't need to.

Option 2: Sell my current home. Buy a live in flip or house hack. Invest the extra money either in real estate or other investment strategies.

Option 3: Stay in my current home until my kids graduate and continue with trying to find small multi-family opportunities. Basically just stay on current course.

My main goal is the best ROI as well as not making my family miserable :). So, my buy box would need to be very specific as far as where I would want to move. I also need to have a very sizeable emergency fund due to the nature of my job.

Any suggestions?

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Ryan BrownPro Member
Real Estate Agent · Louisville, KY · Member since 2022 · 85 posts · 30 votes
1d

Brenda, I wouldn’t let ROE alone push you into selling or moving. Keeping your family comfortable and maintaining the reserves you need have value, too.

I’d probably lean toward option 3 until you find a specific property that makes moving clearly worthwhile. You don’t have to decide what to do with your current house before that opportunity exists.

If you do find something, I'd evaluate the current home as a rental from scratch. The difference between rent and PITI looks promising, but maintenance, vacancy, major replacements, and management still need to come out of that. Principal paydown adds to your return, but it doesn't put cash in your pocket each month.

I wouldn’t sell solely to unlock equity, but I wouldn’t keep it solely because of the 2.75% rate either. Compare the realistic rental return against what the net sale proceeds could accomplish elsewhere.

With your specific buy box, I’d let the right property trigger the decision rather than create pressure to make a move now.

[email protected]502-889-0122
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  • Ryan BrownPro Member
    Real Estate Agent · Louisville, KY · Member since 2022 · 85 posts · 30 votes
    1d

    Brenda, I wouldn’t let ROE alone push you into selling or moving. Keeping your family comfortable and maintaining the reserves you need have value, too.

    I’d probably lean toward option 3 until you find a specific property that makes moving clearly worthwhile. You don’t have to decide what to do with your current house before that opportunity exists.

    If you do find something, I'd evaluate the current home as a rental from scratch. The difference between rent and PITI looks promising, but maintenance, vacancy, major replacements, and management still need to come out of that. Principal paydown adds to your return, but it doesn't put cash in your pocket each month.

    I wouldn’t sell solely to unlock equity, but I wouldn’t keep it solely because of the 2.75% rate either. Compare the realistic rental return against what the net sale proceeds could accomplish elsewhere.

    With your specific buy box, I’d let the right property trigger the decision rather than create pressure to make a move now.

    [email protected]502-889-0122
    2Reply
  • Ryan BakerBusiness Member
    Lender · Strongsville / Cleveland, OH · Member since 2026 · 99 posts · 25 votes
    1d

    Brenda, with that much equity and a 2.75% first mortgage, I'd think hard before touching that loan. A HELOC or second mortgage lets you pull equity for the duplex down payment or rehab while keeping your low rate in place, where a cash-out refi would replace it.

    For the duplex, if you'll live in one unit, owner-occupied financing (FHA or conventional) needs far less down than an investment loan, and a renovation loan like FHA 203k or Fannie Mae HomeStyle can roll the rehab into the purchase for a live-in flip. You do have to actually move in, so your current home would become a rental or second home.

    Happy to sketch out the options on a quick call. My direct line and email are on my profile.

    (Drafted with AI assistance.)

    [email protected]330-548-3340
    1Reply
    • Brenda Reems
      OP
      Bismarck, ND · Member since 2025 · 38 posts · 10 votes
      1d

      I have been looking at 2 different options that are currently on the market. Not saying I would go with either but they are potential options

      Option 1: Duplex (used to be single family home as a 5/3). 3/1 up and 2/1 lower. Listing price $340,000. Rehab cost would be fairly minimal. Some flooring and paint. Lower unit is currently being rented at $925/mo. I have not looked at the current lease. I would want to use that lower unit for at least a couple of years for my family. The deal does not work at the current asking price. It has been on the market a long time. Upper unit could be rented down the road at around $1,700-1,800. They just listed the upper unit for rent a couple of days ago at $1850.

      Option 2: SFH listed at $310,000. I would try to get down to $290,000. Rehab cost of $60,000. I'm not good with ARV as I don't work with a specific realtor but I do watch the market in my area closely. I think a conservative ARV would be $450,000.

      I have not personally looked at either one of these homes besides pictures and the outside.

      Property taxes are low at around 1% and insurance is fairly low.

      0Reply
  • Jimmy Samaha
    Staten Island, NY · Member since 2013 · 133 posts · 67 votes
    1d

    Your own numbers make the keep or sell math pretty easy to run. Rent of $3,000 to 3,200 against $1,900 PITI leaves about $1,100 to 1,300 before vacancy, repairs and management. If you hold back 15 to 20 percent of rent for those, you're around $500 to 800 a month, so roughly $6,000 to 9,800 a year of real cash flow.

    Your equity is at least $325k ($575k value minus a loan that started at $250k), and the $625 a month of principal is another $7,500 a year, though you only get that when you sell or refi. So the total is roughly 4 to 5 percent on that equity, which is the number to compare against what the net sale proceeds could earn elsewhere. If you can beat that after selling costs and taxes, selling wins. If not, that 2.75% rate is a good reason to keep it.

    1Reply
    • Brenda Reems
      OP
      Bismarck, ND · Member since 2025 · 38 posts · 10 votes
      1d

      Thank you for running the numbers! I feel like I am good with math but ROE is something I have had a hard time calculating. 4-5% ROE isn't great. Not much more than a HYSA right now. IDK what I would do with the equity if I sold either.

      I know it isn't a great option if you are looking at just ROE, but I thought about selling and paying cash for the home. Fix as needed. I would be living in a paid for home and if something comes up that I would want to invest in, I could finance at that time.

      0Reply
  • Judith Chime
    Virtual Assistant · Member since 2026 · 19 posts · 5 votes
    1d

    Brenda, the duplex option is interesting, especially since you could occupy one unit and potentially rent both later have you considered how you would fund the purchase and any improvements while keeping enough reserves for your current home?

    0Reply
    • Brenda Reems
      OP
      Bismarck, ND · Member since 2025 · 38 posts · 10 votes
      1d

      I have a fairly sizable savings account. I also do make a higher than average income. I would use savings for the down payment and then rehab as needed. I had a daughter get married this year along with a big HVAC replacement on my current residence. So, I didn't have as much "extra" this year. But, I do have ways of paying for the down payment and repairs. If I don't sell, it will be "skinnier" than I would like until I can build it back up. But, I am a fairly conservative person. So it should/would be fine. As long as nothing major happens with my employment.

      0Reply
  • Gregory AcsPro Member
    Lender · MD · Member since 2025 · 260 posts · 97 votes
    1d

    Hey, saw your post about using your home equity while exploring a duplex or live-in flip. With your current 2.75% rate, keeping that mortgage and financing your next purchase separately could be worth exploring.

    I'm a mortgage broker and happy to help compare the options. Do you have a purchase budget or timeline in mind?

    0Reply
  • Nicholas L.Pro Member
    Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
    1d

    @Brenda Reems

    Hi Brenda. I'm not trying to be negative but LTRs aren't going to accelerate a FIRE path in the short term. They're going to consume cash. They really start to pay off after 10-15 years of ownership.

    Hope this helps

    0Reply
    • Brenda Reems
      OP
      Bismarck, ND · Member since 2025 · 38 posts · 10 votes
      23h

      I am turning 50 in a week. So, I really wish I would have started investing in RE at an earlier age. My thought was that if I could generate some extra income in retirement then I could use that to supplement my 401k and Roth investments. In the next 5 years, I don't want to retire but I would like to work enough to pay for my living expenses and not go so hard with my investing. I could cut back considerably. Then when I actually retire, I would have my RE investments as well as my other retirement accounts. IDK, maybe i'm looking at it wrong. I have a paid off 2nd home that I own with my boyfriend. When my kids graduate, I would consider moving there. But that's 3 years away so things can change by then. So, I guess it isn't a true FIRE. I enjoy my work and I don't think I would do well with a full blown retirement.

      1Reply
  • Dan Duenas
    Lender · Irvine, Orange County · Member since 2026 · 67 posts · 36 votes
    16h

    Don't give up that 2.75% unless a specific deal forces you to. That's the asset here.

    On Option 1, run the rent math honestly: $3,000–3,200 rent minus $1,900 PITI is not $1,100–1,300 cash flow. After vacancy, maintenance, capex, and management, you're realistically looking at a few hundred a month plus the $625 principal paydown. Against $325K–375K of equity, that's a low single-digit return on equity — fine if the goal is holding a paid-off asset, weak if the goal is accelerating FIRE.

    Option 2 frees the equity but you pay transaction costs both ways and you can never buy back a 2.75% rate. Only sell if the live-in flip or house hack you're buying is already identified and pencils without the sale proceeds doing heroic work.

    My read: Option 3 until a specific duplex in your buy box actually pencils — then rent the house out and use savings for the down payment, keeping the HELOC as an emergency backstop only, not as the down payment. The move should be driven by the deal, not by the itch to do something with the equity.

    1Reply
  • Ram Sund
    Calgary, AB · Member since 2026 · 2 posts · 0 votes
    9h

    I would hold off on deciding if you will sell your current house until you find what you're buying into.

    With what you said about rent and PITI, you may be able to keep your house as a rental. I would estimate vacancy, maintenance and future repair costs first and then run the numbers. You're also paying down principal, so you can compare what you're actually getting from keeping the house versus what you could do with the net proceeds if you sold.

    I would stay on number 3 for the time being. Find a house that works within your buy box and won't make your family unhappy. Once you find that house, decide if it's better to sell or keep your current home as a rental.

    I wouldn't jump on either house you listed. You mentioned that the duplex doesn't work for you at the current asking price. I would also want to review the existing lease and get a better idea of what the units could realistically rent for before going further. On the SF home, I would want some good comps and more rehab information before relying on that $450K ARV.

    Once you find the next property, it should be good enough to justify making the move. I wouldn't sell your current house just because you have equity available to use.

    0Reply
  • Ray WilliamsBusiness Member
    Lender · Denver, CO · Member since 2017 · 177 posts · 80 votes
    6h

    Brenda, a couple of lending details that could shape which option you pick, since nobody has hit them yet.

    If there's any chance you keep the house as a rental, open the HELOC now while it's still your primary residence. A lot of HELOC lenders won't open a line on a rental at all, and the ones that will usually lend at a lower percentage of value and a higher rate. An unused line typically costs little or nothing to keep open, and it's much harder to get after you move out. This is the single biggest misstep I see people make, failing to plan ahead and not wanting to pay interest until needed. Pro-tip take the HELOC if they require a draw take it and pay it to zero. Then you are ready. Also, I always advise taking a larger line than needed. You only pay on what you borrow so it is nice to have access to capital when needed.

    Second, being self-employed changes how you qualify for the next purchase. There are two ways. The lender will generally use your net income from the last two years of returns after write-offs, and you'll need to qualify carrying both the 2.75% loan and the new one. Or go bank statement. Rent from the house you're leaving usually only counts with a signed lease and proof of the deposit, and often at about 75% of the rent. Have a lender run that before you shop so you know your real budget.

    Third, ask your CPA and a lender to look at your last two returns together. Depending on how your business is set up, your retirement contributions may or may not reduce the income an underwriter sees.

    On the duplex: conventional now allows 5% down on an owner-occupied 2 to 4 unit, which could leave more of your savings in reserves or the 401k.

    0Reply
  • Caleb Brown
    Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes
    5h

    I'd hold. You have a nice cushion between the PTI and the market rent. To avoid changing your cheap rate you can use the HELOC but I'd use that only for an emergency. I think doing option 1 and finding another property is ideal.

    0Reply
  • BJ Everson
    Realtor · Columbus, Franklin County · Member since 2026 · 67 posts · 16 votes
    3h

    Good instinct to look at ROE, Brenda. A few things I'd add. 1) Compare apples to apples: ROE on your current home is the return on equity you could unlock, so compare it to the all-in return on the duplex (cash-on-cash after reserves, plus loan paydown shown separately). Paydown is real, but don't count it as cash flow. 2) For the $340k duplex, underwrite the lower unit at $925 only after reading the lease and getting an estoppel (term, deposit, any concessions), and price the rent at what a leased comp supports, not what the listing says. Run a stress case with that unit vacant 2 months and a $10-15k reserve for the roof/HVAC/sewer lateral. 3) If you pull equity rather than sell, ask a lender what a HELOC or cash-out costs at today's rates and what the payment does to the duplex's DSCR (1.25x or better is my floor). Selling the current home is also a legit option if you value simplicity; I'd just run the after-tax number first. What's your target monthly cash flow at the end of the 5 years? That would decide a lot.

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